Capstead Mortgage Corporation Announces First Quarter 2013 Results

  Capstead Mortgage Corporation Announces First Quarter 2013 Results

Business Wire

DALLAS -- April 24, 2013

Capstead Mortgage Corporation (NYSE: CMO) (“Capstead” or the “Company”) today
announced financial results for the quarter ended March31, 2013.

                        First Quarter 2013 Highlights

  *Earnings of $34.9million or $0.31 per diluted common share
  *Financing spreads on residential mortgage investments increased 2 basis
    points to 1.15%
  *Operating costs as a percentage of average long-term investment capital
    decreased 2 basis points to 0.77%
  *Book value increased $0.02 to $13.60 per common share
  *Portfolio leverage ended the quarter at 8.06 times long-term investment
    capital

For the quarter ended March31, 2013 Capstead reported net income of
$34,918,000 or $0.31 per diluted common share. This compares to net income of
$35,084,000 or $0.31 per diluted common share for the quarter ended
December31, 2012. The Company paid a first quarter 2013 dividend of $0.31 per
common share on April19, 2013.

                First Quarter Earnings and Related Discussion

Capstead is a self-managed real estate investment trust for federal income tax
purposes. The Company earns income from investing in a leveraged portfolio of
residential adjustable-rate mortgage pass-through securities, referred to as
ARM securities, issued and guaranteed by government-sponsored enterprises,
either Fannie Mae or Freddie Mac, or by an agency of the federal government,
Ginnie Mae. For the quarter ended March31, 2013, the Company reported net
interest margins of $37,925,000 compared to $38,307,000 for the quarter ended
December31, 2012. Financing spreads on residential mortgage investments
averaged 1.15% during the first quarter of 2013, an increase of 2 basis points
from financing spreads earned during the fourth quarter of 2012. Financing
spread on residential mortgage investments is a non-GAAP financial measure
based solely on yields on residential mortgage investments, net of borrowing
rates on repurchase arrangements and similar borrowings, adjusted for
currently-paying interest rate swap agreements held for hedging purposes – see
page 9 for further information.

Yields on Capstead’s residential mortgage investments averaged 1.73% during
the first quarter of 2013, a decrease of 3 basis points from yields reported
for the fourth quarter of 2012 reflecting lower weighted average coupons on
the Company’s ARM securities portfolio. Yield adjustments resulting from
investment premium amortization averaged 84 basis points both quarters
reflecting stable mortgage prepayment levels. Mortgage prepayments expressed
as a constant prepayment rate, or CPR, averaged 19.65% during the first
quarter of 2013, compared to an average CPR of 19.60% during the fourth
quarter of 2012.

The following table illustrates the progression of Capstead’s portfolio of
residential mortgage investments for the quarter (dollars in thousands):

Residential mortgage investments, beginning of quarter   $ 13,860,158
Decrease in unrealized gains on securities
classified as available-for-sale                             (7,705     )
Portfolio acquisitions (principal amount) at average
lifetime purchased yields of 2.09%                           803,409
Investment premiums on acquisitions                          36,474
Portfolio runoff (principal amount)                          (809,546   )
Investment premium amortization                             (28,385    )
Residential mortgage investments, end of quarter           $ 13,854,405 
                                                                        

Interest rates on repurchase arrangements and similar borrowings, adjusted for
currently-paying interest rate swap agreements held as hedges against changes
in short-term interest rates, averaged 0.58% during the first quarter of 2013,
a decrease of five basis points over borrowing rates incurred during the
fourth quarter of 2012. Lower borrowing rates during the first quarter reflect
lower prevailing market rates for repurchase arrangements. Borrowing rates
also benefited from the replacement of $1.10billion in interest rate swap
agreements that required payment of fixed rates averaging 81basis points that
terminated during the quarter with $1.10billion in swap agreements requiring
payment of fixed rates averaging 50 basis points. At March31, 2013 repurchase
arrangements and similar borrowings totaled $12.82billion, consisting
primarily of 30-day borrowings with 24 counterparties at rates averaging
0.40%, before consideration of related swap agreements. At March31, 2013, the
Company held currently-paying swap agreements requiring the payment of fixed
rates of interest averaging 0.67% on notional amounts totaling $4.20billion
with average remaining interest-payment terms of 12 months. Additionally, as
of quarter-end the Company had entered into forward-starting swap agreements
with notional amounts totaling $2.10billion that will begin requiring fixed
rate interest payments averaging 0.45% for two-year periods that commence on
various dates between June 2013 and January 2014, with an average expiration
of 31 months. Variable payments, typically based on one-month LIBOR, that are
received by the Company under swap agreements tend to offset a significant
portion of the interest owed on a like amount of the Company’s borrowings
under repurchase arrangements.

Capstead’s long-term investment capital, which consists of common and
perpetual preferred stockholders’ equity and long-term unsecured borrowings
(net of related investments in statutory trusts), declined modestly during the
first quarter of 2013 to $1.59billion at quarter-end. Portfolio leverage
(borrowings under repurchase arrangements divided by long-term investment
capital) increased modestly to 8.06 to one at March31, 2013 compared to 8.00
to one at December31, 2012.

Operating costs as a percentage of average long-term investment capital
declined to 0.77% during the first quarter of 2013 compared to 0.79% during
the fourth quarter of 2012, due primarily to lower compensation-related
expense, a significant portion of which is performance-based.

                           Common Share Repurchases

Early in January 2013 Capstead repurchased 638,000 common shares pursuant to
the Company’s $100million stock repurchase authorization at an average price
of $11.43 per share or 84% of trailing book value per common share. No further
repurchases have been made since January, leaving $58million of this
authorization available for future repurchases. Common share repurchases may
continue in future periods subject to market conditions and blackout periods
associated with the dissemination of earnings and dividend announcements and
other important Company-specific news.

                         Book Value per Common Share

Nearly all of Capstead’s residential mortgage investments and all of its
interest rate swap agreements are reflected at fair value on the Company’s
balance sheet and are therefore included in the calculation of book value per
common share (total stockholders’ equity, less perpetual preferred share
liquidation preferences, divided by common shares outstanding). The fair value
of these investments is impacted by market conditions, including changes in
interest rates, and the availability of financing at reasonable rates and
leverage levels, among other factors. The Company’s investment strategy
attempts to mitigate these risks by focusing on investments in
agency-guaranteed residential mortgage pass-through securities, which are
considered to have little, if any, credit risk and are collateralized by ARM
loans with interest rates that reset periodically to more current levels.
Because of these characteristics, the fair value of Capstead’s portfolio is
considerably less vulnerable to significant pricing declines caused by credit
concerns or rising interest rates compared to portfolios containing a
significant amount of non-agency and/or fixed-rate mortgage securities. The
following table illustrates the progression of Capstead’s book value per
common share for the quarter ended March31, 2013:

Book value per common share, beginning of quarter            $ 13.58
Capital transactions:
Accretion from common share repurchases                          0.01
Increase related to stock awards                                 0.01
Decrease in fair value of mortgage securities
classified as available-for-sale                                 (0.08 )
Increase in fair value of interest rate swap
agreements designated as cash flow hedges of:
Repurchase arrangements and similar borrowings                   0.05
Unsecured borrowings                                            0.03  
Book value per common share, end of quarter                    $ 13.60 
Increase in book value per common share during the quarter     $ 0.02  
                                                                       

                              Management Remarks

Commenting on current operating and market conditions, Andrew F. Jacobs,
President and Chief Executive Officer, said, “First quarter results reflect
stable quarter over quarter mortgage prepayment levels on our
agency-guaranteed ARM securities portfolio as well as lower borrowing costs,
which more than offset slightly lower weighted average coupons on the
portfolio. Lower borrowing costs reflect lower market rates during the quarter
as well as the rollover to lower rates of a significant portion of our
currently-paying swap position. Together, these factors contributed to a 2
basis point increase in our financing spreads to 1.15%, with earnings
remaining at $0.31 per diluted common share. We also posted a $0.02 increase
in book value to $13.60 per common share reflecting stable quarter over
quarter pricing levels for agency-guaranteed ARM securities.

“Looking forward to the rest of 2013, we are optimistic our portfolio will
continue to perform well. Mortgage prepayment levels should remain manageable
in the coming quarters given that approximately 91% of the mortgages
underlying our current-reset ARM securities were originated prior to 2008 and
carry coupon interest rates at or below prevailing fixed mortgage rates
diminishing the economic advantage, if any, of refinancing. This should help
contain investment premium amortization costs, which decreased $0.9million
this quarter to $28.4million. Also, further declines in weighted average
coupons should be relatively modest given that an increasing number of
mortgage loans underlying our current-reset ARM securities are at or near
fully-indexed levels. With respect to our borrowing costs, another
$1.80billion notional amount of our interest rate swaps with average fixed
rates of 0.87% will mature over the remainder of 2013 and have already been
replaced with swaps averaging 0.45% allowing for further declines in borrowing
costs provided market rates for short-term borrowings remain reasonable.

“We remain confident in and focused on our investment strategy of managing a
conservatively leveraged portfolio of agency-guaranteed residential ARM
securities that can produce attractive risk-adjusted returns over the long
term while reducing, but not eliminating, sensitivity to changes in interest
rates.”

                       Earnings Conference Call Details

An earnings conference call and live audio webcast will be hosted Thursday,
April25, 2013 at 9:00a.m. ET. The conference call may be accessed by dialing
toll free (888) 317-6016 in the U.S., (855) 669-9657 for Canada, or (412)
317-6016 for international callers. A live audio webcast of the conference
call can be accessed via the investor relations section of the Company’s
website at www.capstead.com, and an audio archive of the webcast will be
available for approximately 60 days. A replay of the call will be available
through June26, 2013 by dialing toll free (877) 344-7529 in the U.S. or (412)
317-0088 for international callers and entering conference number 10027162.

          Cautionary Statement Concerning Forward-looking Statements

This document contains “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
include, without limitation, any statement that may predict, forecast,
indicate or imply future results, performance or achievements, and may contain
the words “believe,” “anticipate,” “expect,” “estimate,” “intend,” “will be,”
“will likely continue,” “will likely result,” or words or phrases of similar
meaning.

Forward-looking statements are based largely on the expectations of management
and are subject to a number of risks and uncertainties including, but not
limited to, the following:

  *changes in general economic conditions;
  *fluctuations in interest rates and levels of mortgage prepayments;
  *the effectiveness of risk management strategies;
  *the impact of differing levels of leverage employed;
  *liquidity of secondary markets and credit markets;
  *the availability of financing at reasonable levels and terms to support
    investing on a leveraged basis;
  *the availability of new investment capital;
  *the availability of suitable qualifying investments from both an
    investment return and regulatory perspective;
  *changes in legislation or regulation affecting Fannie Mae, Freddie Mac and
    similar federal government agencies and related guarantees;
  *deterioration in credit quality and ratings of existing or future
    issuances of Fannie Mae, Freddie Mac or Ginnie Mae securities;
  *changes in legislation or regulation affecting exemptions for mortgage
    REITs from regulation under the Investment Company Act of 1940; and
  *increases in costs and other general competitive factors.

In addition to the above considerations, actual results and liquidity are
affected by other risks and uncertainties which could cause actual results to
be significantly different from those expressed or implied by any
forward-looking statements included herein. It is not possible to identify all
of the risks, uncertainties and other factors that may affect future results.
In light of these risks and uncertainties, the forward-looking events and
circumstances discussed herein may not occur and actual results could differ
materially from those anticipated or implied in the forward-looking
statements. Forward-looking statements speak only as of the date the statement
is made and the Company undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Accordingly, readers of this document are cautioned not
to place undue reliance on any forward-looking statements included herein.



CAPSTEAD MORTGAGE CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except ratios and per share amounts)

                                       March 31, 2013   December 31, 2012
                                        (unaudited)     
Assets
Residential mortgage investments
($13.45 billion pledged under
repurchase arrangements
at March 31, 2013 and December 31,        $ 13,854,405       $  13,860,158
2012)
Cash collateral receivable from             40,233              49,972
interest rate swap counterparties
Interest rate swap agreements at fair       114                 169
value
Cash and cash equivalents                   471,510             425,445
Receivables and other assets                120,725             130,402
Investments in unconsolidated              3,117             3,117       
affiliates
                                          $ 14,490,104      $  14,469,263  
Liabilities
Repurchase arrangements and similar       $ 12,821,519       $  12,784,238
borrowings
Interest rate swap agreements at fair       24,763              32,868
value
Unsecured borrowings                        103,095             103,095
Common stock dividend payable               30,349              29,512
Accounts payable and accrued expenses      20,286            22,425      
                                           13,000,012        12,972,138  
Stockholders’ equity
Preferred stock - $0.10 par value;
100,000 shares authorized:
$1.60 Cumulative Preferred Stock,
Series A,
186 shares issued and outstanding
($3,054 aggregate

liquidation preference) at March 31,        2,604               2,604
2013 and

December 31, 2012
$1.26 Cumulative Convertible
Preferred Stock, Series B,
16,493 shares issued and outstanding

($187,692 aggregate liquidation
preference) at
March 31, 2013 and December 31, 2012        186,388             186,388
Common stock - $0.01 par value;
250,000 shares authorized:
95,532 and 96,229 shares issued and
outstanding at
                                            955                 962
March 31, 2013 and December 31, 2012,
respectively
Paid-in capital                             1,359,879           1,367,199
Accumulated deficit                         (353,852   )        (353,938    )
Accumulated other comprehensive            294,118           293,910     
income
                                           1,490,092         1,497,125   
                                          $ 14,490,104      $  14,469,263  
Long-term investment capital
(Stockholders’ equity and unsecured
borrowings net of investments in          $ 1,590,070        $  1,597,103
related unconsolidated affiliates)
(unaudited)
Portfolio leverage (Repurchase
arrangements and similar borrowings         8.06:1              8.00:1
divided by long-term investment
capital) (unaudited)
Book value per common share (based on
common shares outstanding and
calculated assuming liquidation           $ 13.60            $  13.58
preferences for the Series A and B
preferred stock) (unaudited)



CAPSTEAD MORTGAGE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)

                                                 Quarter Ended

                                                   March 31
                                                 2013        2012    
Interest income:                                                
Residential mortgage investments                   $ 58,468        $ 65,733
Other                                               112           150     
                                                    58,580        65,883  
Interest expense:
Repurchase arrangements and similar borrowings       (18,468 )       (14,103 )
Unsecured borrowings                                (2,187  )      (2,187  )
                                                    (20,655 )      (16,290 )
                                                    37,925        49,593  
Other revenue (expense):
Miscellaneous other revenue (expense)                (30     )       (169    )
Incentive compensation                               (351    )       (1,538  )
Salaries and benefits                                (1,610  )       (1,827  )
Other general and administrative expense            (1,081  )      (954    )
                                                    (3,072  )      (4,488  )
Income before equity in earnings of
unconsolidated affiliates                            34,853          45,105
Equity in earnings of unconsolidated                65            65      
affiliates
Net income                                         $ 34,918       $ 45,170  
Net income available to common stockholders:
Net income                                         $ 34,918        $ 45,170
Less cash dividends paid on preferred shares        (5,270  )      (5,213  )
                                                   $ 29,648       $ 39,957  
                                                                   
Net income per common share:
Basic                                              $ 0.31          $ 0.45
Diluted                                              0.31            0.44
                                                                   
Weighted average common shares outstanding:
Basic                                                95,020          89,449
Diluted                                              95,450          89,859
                                                                   
Cash dividends declared per share:
Common                                             $ 0.310         $ 0.430
Series A Preferred                                   0.400           0.400
Series B Preferred                                   0.315           0.315



CAPSTEAD MORTGAGE CORPORATION
FAIR VALUE ANALYSIS
(in thousands, unaudited)

                      March 31, 2013                                                                    December
                                                                                                            31, 2012
                        Unpaid                          Basis or                            Unrealized      Unrealized
                                         Investment                      Fair               Gains           Gains
                     Principal                   Notional                                     
                                         Premiums                        Value              (Losses)        (Losses)
                        Balance                         Amount
Residential
mortgage
investments
                                                                                   
classified as
available-for-sale:
^(a) (b)
Fannie Mae/Freddie
Mac securities:
Current-reset ARMs      $ 6,667,734      $  165,043     $ 6,832,777      $ 7,070,595        $ 237,818       $ 250,550
Longer-to-reset           4,858,986         198,467       5,057,453        5,107,686          50,233          43,772
ARMs
Fixed-rate                57                –             57               61                 4               5
Ginnie Mae
securities :
Current-reset ARMs        795,542           19,500        815,042          830,846            15,804          14,693
Longer-to-reset          787,244          29,978       817,222         832,107          14,885        17,429  
ARMs
                        $ 13,109,563     $  412,988     $ 13,522,551     $ 13,841,295      $ 318,744      $ 326,449 
Interest rate swap                                      $ 6,400,000      $ (24,649    )     $ (24,626 )     $ (32,539 )
positions ^(c)

      Unrealized gains and losses on residential mortgage securities
      classified as available-for-sale are recorded as a component of
      Accumulated other comprehensive income in Stockholders’ equity. Gains or
(a)  losses are generally recognized in earnings only if sold. Residential
      mortgage securities classified as held-to-maturity with a cost basis of
      $5 million and unsecuritized investments in residential mortgage loans
      with a cost basis of $8 million are not subject to mark-to-market
      accounting and therefore have been excluded from this analysis.
      Capstead classifies its residential ARM securities based on the average
(b)   length of time until the loans underlying each security reset to more
      current rates (see page 10 of this release for further information).
      To help mitigate exposure to higher short-term interest rates, Capstead
      typically uses currently-paying and forward-starting one- and
      three-month LIBOR-indexed, pay-fixed, receive-variable, interest rate
      swap agreements with two-year interest payment terms. Additionally, the
      Company has entered into three forward-starting swap agreements with
      notional amounts totaling $100 million and terms coinciding with the
      variable-rate terms of the Company’s long-term unsecured borrowings that
(c)   begin in 2015 and 2016 and end with their maturities in 2035 and 2036.
      Swap positions are carried on the balance sheet at fair value with
      related unrealized gains or losses arising while designated as cash flow
      hedges for accounting purposes reflected as a component of Accumulated
      other comprehensive income in Stockholders’ equity and related hedge
      ineffectiveness recognized in Interest expense. As of March 31, 2013,
      these swap positions had the following characteristics (dollars in
      thousands):

                                     Average                         Unrealized
Period of            Notional        Fixed Rate      Fair
Contract                                                     Gains
Expiration           Amount          Payment         Value           (Losses)
                                     Requirement
Currently-paying
two-year                                                    
contracts:
Second quarter       $ 700,000       0.96    %       $ (809    )     $ (808    )
2013
Third quarter          300,000       0.87              (809    )       (809    )
2013
Fourth quarter         800,000       0.78              (2,567  )       (2,559  )
2013
First quarter          200,000       0.60              (531    )       (531    )
2014
Second quarter         400,000       0.51              (996    )       (989    )
2014
Third quarter          200,000       0.51              (596    )       (596    )
2014
Fourth quarter         500,000       0.58              (2,212  )       (2,212  )
2014
First quarter         1,100,000     0.50             (3,814  )      (3,814  )
2015
                       4,200,000     0.67              (12,334 )       (12,318 )
Forward-starting
two-year
contracts:
Second quarter         200,000       0.43              (335    )       (335    )
2015
Third quarter          400,000       0.47              (587    )       (587    )
2015
Fourth quarter         1,200,000     0.45              (449    )       (442    )
2015
First quarter         300,000       0.47             (2      )      (2      )
2016
                     $ 6,300,000                     $ (13,707 )     $ (13,684 )
Forward-starting
contracts
expiring in 2035
and 2036 related
to unsecured         $ 100,000       4.09            $ (10,942 )     $ (10,942 )
borrowings

    After consideration of related swap positions, the Company’s residential
    mortgage investments and related borrowings under repurchase arrangements
*  had durations as of March 31, 2013 of approximately ten and nine months,
    respectively, for a net duration gap of approximately one month. Duration
    is a measure of market price sensitivity to changes in interest rates.



CAPSTEAD MORTGAGE CORPORATION
FINANCING SPREAD ANALYSIS
(unaudited)

                     2013      2012
                    Q1        Q4        Q3        Q2        Q1
Yields on
residential                                                     
mortgage
investments:^(a)
Cash yields            2.57  %     2.60  %     2.65  %     2.71  %     2.74  %
Investment premium     (0.84 )     (0.84 )     (0.79 )     (0.67 )     (0.60 )
amortization
Adjusted yields        1.73        1.76        1.86        2.04        2.14
Related borrowing
rates:^(b)
Unhedged borrowing     0.41        0.45        0.41        0.37        0.32
rates
Fixed swap rates       0.71        0.75        0.78        0.80        0.85
Adjusted borrowing     0.58        0.63        0.56        0.54        0.49
rates
Financing spreads
on residential         1.15        1.13        1.30        1.50        1.65
mortgage
investments
Annualized CPR         19.65       19.60       18.74       15.86       14.50

      Cash yields are based on the cash component of interest income.
      Investment premium amortization is determined using the interest method
(a)  and incorporates actual and anticipated future mortgage prepayments.
      Both are expressed as a percentage calculated on an annualized basis on
      average amortized cost basis for the indicated periods.
      Unhedged borrowing rates represent average rates on repurchase
      agreements and similar borrowings. Fixed swap rates represent the
      average fixed rates on currently-paying interest rate swap agreements
      used to hedge short-term borrowing rates. Adjusted borrowing rates
(b)   reflect unhedged borrowing rates and swap rates as well as differences
      between variable rate payments received on the Company’s
      currently-paying swap agreements, which typically are based on one-month
      LIBOR, and unhedged borrowing rates as well as any measured hedge
      ineffectiveness, calculated on an annualized basis on average
      outstanding balances for the indicated periods.

Financing spreads on residential mortgage investments, a non-GAAP financial
measure, differs from total financing spreads, an all-inclusive GAAP measure,
that is based on all interest-earning assets and all interest-paying
liabilities. The Company believes that presenting financing spreads on
residential mortgage investments provides useful information for evaluating
the performance of the Company’s portfolio. The following reconciles these two
measures.

                     2013      2012
                    Q1        Q4        Q3        Q2        Q1
Financing spreads
on residential         1.15  %     1.13  %   1.30  %   1.50  %   1.65  %
mortgage
investments
Impact of yields
on other               (0.05 )     (0.07 )     (0.05 )     (0.06 )     (0.06 )
interest-earning
assets*
Impact of
borrowing rates on
unsecured
borrowings and
other
interest-paying        (0.06 )     (0.06 )     (0.06 )     (0.07 )     (0.07 )
liabilities*
Total financing        1.04        1.00        1.19        1.37        1.52
spreads

    Other interest-earning assets consist of overnight investments and cash
    collateral receivable from interest rate swap counterparties. Other
*  interest-paying liabilities consist of long-term unsecured borrowings (at
    a borrowing rate of 8.49%) that the Company considers a component of its
    long-term investment capital and cash collateral payable to interest rate
    swap counterparties.



CAPSTEAD MORTGAGE CORPORATION
RESIDENTIAL ARM SECURITIES PORTFOLIO STATISTICS
(as of March 31, 2013)
(dollars in thousands, unaudited)

                    Amortized                   Fully       Average     Average      Average      Months
                                    Net
                  Cost Basis     WAC      Indexed   Net       Periodic   Lifetime   To
ARM Type ^(a)       ^(b)             ^(c)       WAC         Margins     Caps         Caps         Roll
                                                ^(c)        ^ (c)       ^(c)         ^(c)         ^(a)
Current-reset                                                                      
ARMs:
Fannie Mae
Agency              $ 5,058,011      2.42 %     2.23  %     1.70  %     3.19  %      10.15  %     5.0
Securities
Freddie Mac
Agency                1,774,766      2.62       2.35        1.84        2.02         10.67        5.6
Securities
Ginnie Mae
Agency                815,042        2.44       1.68        1.51        1.02         9.17         7.2
Securities
Residential          4,759          3.49       2.33        2.04        1.51         10.97        4.5
mortgage loans
                     7,652,578      2.47       2.20        1.71        2.69         10.16        5.4
Longer-to-reset
ARMs:
Fannie Mae
Agency                3,132,756      2.94       2.49        1.76        4.92         7.95         43.6
Securities
Freddie Mac
Agency                1,924,697      2.96       2.56        1.84        4.94         7.98         46.1
Securities
Ginnie Mae
Agency               817,222        2.96       1.67        1.51        1.03         7.99         29.6
Securities
                     5,874,675      2.95       2.40        1.75        4.39         7.96         42.5
                    $ 13,527,253     2.68       2.29        1.73        3.43         9.21         21.3
                                                                                                  
Gross WAC (rate paid by              3.29
borrowers) ^(d)

      Capstead classifies its ARM securities based on the average length of
      time until the loans underlying each security reset to more current
      rates (“months-to-roll”) (less than 18 months for “current-reset” ARM
(a)  securities, and 18 months or greater for “longer-to-reset” ARM
      securities). Once an ARM loan reaches its initial reset date, it will
      reset at least once a year to a margin over a corresponding interest
      rate index, subject to periodic and lifetime limits or caps.
      Amortized cost basis represents the Company’s investment (unpaid
      principal balance plus unamortized investment premiums) before
      unrealized gains and losses. As of March 31, 2013, the ratio of
(b)   amortized cost basis to related unpaid principal balance for the
      Company’s ARM securities was 103.15. This table excludes $3 million in
      fixed-rate Agency Securities, $3 million in fixed-rate residential
      mortgage loans and $2 million in private residential mortgage
      pass-through securities held as collateral for structured financings.
      Net WAC, or weighted average coupon, is the weighted average interest
      rate of the mortgage loans underlying the indicated investments, net of
      servicing and other fees as of the indicated date. Net WAC is expressed
      as a percentage calculated on an annualized basis on the unpaid
      principal balances of the mortgage loans underlying these investments.
      Fully indexed WAC represents the weighted average coupon upon one or
      more resets using interest rate indexes and net margins as of the
      indicated date. Average net margins represent the weighted average
      levels over the underlying indexes that the portfolio can adjust to upon
      reset, usually subject to initial, periodic and/or lifetime limits, or
      caps, on the amount of such adjustments during any single interest rate
      adjustment period and over the contractual term of the underlying loans.
(c)   ARM securities issued by the GSEs with initial fixed-rate periods of
      five years or longer typically have 500 basis point initial caps with
      200 basis point periodic caps. Additionally, certain ARM securities held
      by the Company are subject only to lifetime caps or were not subject to
      a cap. For presentation purposes, average periodic caps in the table
      above reflect initial caps until after an ARM security has reached its
      initial reset date and lifetime caps, less related current net WAC, for
      ARM securities subject only to lifetime caps. At quarter-end, 79% of
      current-reset ARMs were subject to periodic caps averaging 1.85%; 6%
      were subject to initial caps averaging 2.22%; 14% were subject to
      lifetime caps, less related current net WAC, averaging 7.59%; and 1%
      were not subject to a cap. All longer-to-reset ARM securities at March
      31, 2013 were subject to initial caps.
      Gross WAC is the weighted average interest rate of the mortgage loans
(d)   underlying the indicated investments, including servicing and other fees
      paid by borrowers, as of the indicated balance sheet date.

Contact:

Capstead Mortgage Corporation
Investor Relations
Lindsey Crabbe, 214-874-2339